What are the benefits to companies?
Depending on the stage and extent of use, XBRL can benefit companies in the following ways:
- Cost savings. If a company is required to prepare multiple reports in differing formats from the same general information, XBRL can reduce the amount of time spent re-keying and reformatting the data to meet the reporting requirements. Financial data that has been "tagged" using XBRL can be rendered in the necessary format in a more automated, efficient manner, thereby reducing administrative costs.
- Streamlined information gathering. XBRL can help ease the challenges of compiling consolidated data in today’s global operating environment by providing a common platform for internal reporting of different branches, subsidiaries and segments, each of which may depend on different software and accounting systems.
- Improved accuracy and reliability. The discipline and validation procedures involved in preparing XBRL reports can instill greater accuracy in business reporting, and companies can take greater comfort in the reliability of their data as it passes through external communications and analytical tools.
- More timely period-end closings. The reporting timeline can be streamlined as data received from subsidiary locations arrives in a uniformly, standardized format and with less errors.
- Increased visibility to analysts. XBRL facilitates financial analysis by bringing the data of more companies to the attention of securities analysts in an efficient manner. As a result, analysts may find it easier to increase the number of companies they cover, resulting in greater visibility for smaller companies and industries that have historically had great difficulty attracting investors that typically rely on analyst reports in determining their investment strategies.
- Tell your own story. Today, data aggregators provide a considerable portion of the information used by analysts and investors, leaving companies in a reactive mode of answering questions about data provided by someone else. Given a choice, managements often prefer to take the initiative and tell their own stories.
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